The manufacturing sector, constituting nearly 20% of GDP, has played a crucial role in offsetting a broader economic slowdown, according to a report by HSBC Global Investment Research. The sector’s resilience has been attributed to strong performance in exports and inventory build-up, driven by energy-market uncertainties. Notably, lower US tariffs have facilitated an increase in non-oil exports.
The report highlighted a potential weakening in economic momentum during April-May, citing risks from a very strong El Niño and a weak monsoon that could impact agriculture and rural demand. Despite these challenges, the acceleration of non-oil exports due to reduced US tariffs has bolstered factory activity. Additionally, services, accounting for 55% of GDP, are identified as positive growth drivers outside agriculture.
Factors such as a decline in oil prices and improved financial conditions are expected to support growth in sectors like trade, transport, and finance. The report emphasized the positive impact of falling yields across various financial instruments even before the influx of capital from recent packages. In contrast, agriculture, facing adverse weather conditions, is experiencing strains on rural demand, evident through indicators like youth unemployment rise and slowdown in two-wheeler sales.
